Interns and employment issues

by Orrick, Herrington & Sutcliffe LLP
1. Are interns employees?

This is an important question with a big impact on the individual concerned and what remuneration and rights they are entitled to. And the answer is…it depends. The main determining factor is whether they are doing work for you under your direction or are they simply there to observe and work shadow? The most likely scenario is the former and therefore they are either employees or (the lesser known category of) workers.

If this is the case, the key thing to remember is that the status of employee or worker entitles them to a number of statutory rights and protections, including paid annual leave and statutory sick pay and their salary must be subject to PAYE.

2. Do I have to pay them?

In 2011, the government published a social mobility strategy to overcome what had become the status quo with unpaid internships and their use as a route into employment in certain industries. A large number of internships were acknowledged to give an unfair advantage for those who could afford to go unpaid. As a result of this strategy, HMRC has led a crackdown on unpaid internships, and currently has a policy of "naming and shaming" employers who don’t pay National Minimum Wage to interns, which is a mention in the national press most employers would do well to avoid.

With this context in mind, workers, as well as employees, are entitled to payment of the national minimum wage. The current hourly rates of NMW are:

  • for workers aged 21 or over: £6.31; and
  • for workers aged between 18 and 20 inclusive: £5.03.

You are certainly allowed to pay your interns more! The Living Wage Foundation has calculated an hourly rate to meet the basic cost of living in the UK. Within London this is currently set at £8.80, and is £7.65 for the rest of the UK.

There are very limited circumstances only in which you would not have to pay an intern NMW, one being if they are purely there to observe or "work shadow", and another being voluntary workers who work for charities, voluntary organisations, associated fund-raising bodies and statutory bodies only. So no such luck for city employers!

Current NMW exemptions and government guidance should always be checked; the most recent BIS guidance is available here.

3. If we've got interns, what should we worry about?

If your interns are employees or workers, you should consider the same factors that you do for the rest of your work force: ensuring they are treated correctly and not discriminated against, are paid, take holidays and breaks, and aren't made promises (in particular for work in the future) which the business is not able or intending to honour. The latter is of particular relevance to the intern, who will often be looking to line up a job for after graduation, and managers should be sure not to make potentially contractual promises, especially in writing.

Your intern will be subject to the same duties of confidentiality and loyalty that other staff members are, but it’s always worth setting these out in writing like you would with any employee. If your intern is working in a development or creative role, you might want to consider putting an intellectual property assignment in place, and if they will have access to confidential information, a training session on the importance of keeping this information confidential, together with a written confidentiality undertaking, are likely to be good ideas, particularly if the person involved hasn't had a "real job" before.

The best way to protect the business is to gather up the key terms you are concerned about into a simple fixed term contract, and then all involved know where they stand. Provide the intern with any training they need to understand the business, their role and responsibilities when they arrive at your organisation, and treat the intern as a "proper" member of staff for the duration. This should ensure the internship is a beneficial experience for both parties, and hopefully won't leave you with a headache when autumn comes around.

Rachel Easter, Trainee Solicitor also contributed to this article.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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